While volatility in crude oil prices is sky high, other commodities are largely treading water, awaiting fresh triggers. Market players are closely watching efforts by countries to reopen their economies. We are also seeing some positioning ahead of key events and central bank meetings this week.
After a historic drop to sub-zero levels last week, crude oil has continued to trend lower amid concerns that global storage may soon run out of space. Gold has been struggling to hold momentum over $1,700 per troy ounce but remains supported by loose monetary policy stance of central banks.
Industrial metals led by copper have recovered from recent lows amid stable equity markets and supply disruptions but demand concerns have continued to weigh. Natural gas has been stuck in a range as hopes of production cut are countered by weakness across energy sector.
On the coronavirus front, many countries have seen deaths and infections slow and this has helped them bolster efforts to lift restrictions and help their economies recover. Market players, however, remain wary that a rushed reopening could result in a surge in fresh cases, forcing countries to take more stringent measures.
Meanwhile, rising virus cases worldwide and warnings by major agencies and health researchers don’t bode well.
As per Johns Hopkins University update, global cases have surpassed the 3-million mark while death toll tops 210,000. Bloomberg reports that China’s top scientists have said the coronavirus will not be eradicated, joining a growing consensus that the pathogen will likely return in waves.
The World Health Organization expressed concerns about the rising number of cases in Latin America, Africa and some Asian countries, adding the pandemic is far from over.
In the last few days, readings from major economies have highlighted the negative impact from the outbreak.
Focus now will be on US Q1 GDP growth estimate and China’s manufacturing PMI data due this week.
Forecasts indicate that US GDP will fall sharply in Q1 as virus-related restrictions affected economic activity. A slowdown has been factored in and market will now react to intensity of contraction in the economy.
China’s manufacturing PMI slumped to record low in February but bounced back above 50 levels in March. Market players want to see whether the recovery has continued. While China has started to reopen its economy, weaker global growth has dampened demand for Chinese goods.
Bank of Japan, at its meeting on April 27, announced additional monetary easing measures, setting the stage for Federal Reserve and European Central Bank’s meeting later this week.
Both these central banks have taken aggressive measures in the last few weeks to support their economies but fresh measures may not be announced this week. Stability in financial markets may give central banks some room to delay any fresh decision.
The author is VP- Head Commodity Research at Kotak Securities.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.