Commodities: Higher as the risk-on tone in markets picked up - ANZ

Research Team at ANZ, notes that the commodities were higher yesterday as the risk-on tone in markets picked up after concerns around the Italian election eased.

Key Quotes

“Brent crude oil prices continued to benefit from last week’s decision by OPEC to cut production. The focus moved to non-OPEC producers, with 14 producers being asked to meet OPEC in Vienna on Saturday. While Russia has already committed to reduce its output by 300kb/d, the group is looking for further commitments to help accelerate the inventory drawdown in 2017.”

“Industrial metals were stronger, with the gains led by copper. Sentiment continues to improve, boosted by better-than-expected service PMIs in China and the US. Nickel also gained after the Philippines Environmental Department announced it would release results of the mine audit on 15 December. Secretary Gina Lopez warned that there will be mine suspensions. Iron ore spot physical prices pushed higher as futures markets in China recovered from last week’s losses. Rebar and hot rolled coil steel futures were up over 2.5%, while iron ore futures surged 5.4% as market sentiment around demand improved.”

“For gold, the safe haven buying that emerged after the Italian referendum was relatively short-lived, with prices easing as investors shrugged of the political turmoil.”

“Agriculture markets were mixed, with softs under pressure while grains surged. Sugar fell after China indicated it would restrict imports while Nestle said it had found a way to reduce the amount of sugar in chocolate by 40%. Wheat prices jumped higher after weather reports in the US raised concerns that the current crop would be weaker than expected.”