Risk off tone weighs on sentiment
Daniel Hynes
Senior Commodity Strategist | helping investors and companies navigate macro, political, economic & environmental issues
Highlights
A risk-off tone across markets dented sentiment in the commodity sector. This was aided by a stronger USD, which weighed on investor appetite.
Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.
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Market Commentary
Gold fell after a weak US Treasuries auction sent yields higher. This sparked a risk-off tone across markets and drove the USD up. Investor demand for the precious metal then came under pressure. Investors are nervous ahead of US inflation data. Fed officials earlier this week stoked concerns that any lack of progress on disinflation could see a prospective rate cut taken off the table. Silver bucked the trend to move higher as physical demand shows signs of growth. China has increased its imports in recent months, hitting a three-year high of 340t in April. The premium on Shanghai spot prices climbed to 15% last week, while stockpiles in China have dwindled due to persistent strong demand from the solar industry.
The risk-off tone weighed on crude oil prices, with Brent and WTI both falling more than 1% during the session. The drops pared gains earlier this week on renewed geopolitical risks. An Egyptian solider was killed in a clash with Israeli forces as they advance into the Gazan city of Rafah. Houthi militants also renewed their attacks on ships in the Red Sea. Investors are likely to remain on edge as they await the OPEC meeting this Sunday. The producer group faces a challenging outlook for demand. The Asian nation has recently curbed its purchases from Saudi Arabia and Russia due to soft demand. This may be offset by growth in developed markets. Initial data suggest a relatively high number of US holiday trips have been taken over the Memorial Day holiday, the traditional start of the driving season.
Global gas prices were mixed as the recent rally pushes some buyers to the sidelines. European benchmarks were higher as traders become increasingly concerned about rising competition for LNG cargo. Soaring temperatures from Argentina to India could stoke strong demand for gas as cooling demand rises. For the moment, robust stockpiles and strong renewable energy power generation should offset those concerns. The North Asia LNG spot price edged lower as some traders paused activity following the recent gains. Nevertheless, the prospect of stronger demand is likely to see them back soon. Argentina is the latest country to suffer a supply crunch. Colder than normal temperatures along with a deferred start to the full operations of the Nestor Kirchner gas pipeline is forcing it to dip into the LNG market.
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Aluminium touched its highest level in two years on hopes of stronger demand from China and developed markets. Traders have been buoyed by property support measures Beijing announced last week. Meanwhile, the US economy remained resilient. Business activity accelerated according to the S&P Global flash May composite Purchasing Managers Index, which rose more than 3pts to 54.4 to its highest level since April 2022. Following recent flows of Russian metal in to exchanges, traders are concerned supplies will tighten as new output is banned from being delivered into their warehouses. Copper bucked the trend to end the session higher, weighed down by a stronger USD.
Iron ore futures rebounded as efforts to support the Chinese property sector offset ample supplies of iron ore.?
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China's demand for silver is surging amid a rapid build out of solar power capacity
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Assistant Vice President, Wealth Management Associate
9 个月Thanks for sharing