'Push and pull of negative and positive factors on macro front may keep commodities choppy in near-term'

Commodities in international markets noted choppy movement this week amid mixed cues on the macro front.

Most commodities opened on a higher note as the general risk on mode from prior week spilt on to this week after Joe Biden won the US Presidential race.

This upbeat risk appetite was further buoyed amid reports of progress on COVID-19 vaccine front. Pfizer Inc said its COVID-19 vaccine, developed with German partner BioNTech SE, was more than 90 percent effective in preventing infection, marking the first successful results from a large-scale clinical trial.

Later on Wednesday, Moderna Inc said it had enough data for a first interim analysis of the late-stage trial of its experimental COVID-19 vaccine, while Germany's CureVac said its vaccine has been shown to remain stable at 5 degrees Celsius (41 F) for at least three months, making it potentially easier to distribute than some rivals’ compounds. (Reuters)

These signs of progress on vaccination front lifted risky assets including commodities like base metals and crude oil but weighed on safe haven like gold and silver.

Commodities in general also sought support from easing measures by global central banks. Bank of England last week increased its bond purchases by 150 billion pounds while Fed maintained accommodative stance. Furthermore, ECB chief Cristine Lagarde this week said that the central bank will focus on more emergency bond purchases and cheap loans for banks when it puts together its new stimulus package next month.

However, the euphoria over progress on vaccination front and central bank support was offset by worsening virus situation and worries over its effect on global growth. The number of infections surged at an accelerated pace across US and Europe leading to re-imposition of lockdown measures which in turn dented global growth outlook. As per the latest data from John Hopkins University, global coronavirus cases topped 52.82 million with US accounting for more than 10.55 million cases. Meanwhile in Europe following the surge in cases nations like the UK, Germany, France, Ireland and Greece to name a few are under some form of restrictions to curb the contagion.

Apart from surging virus cases, global sentiments have also been hurt due to stalemate over US election outcome and uncertainty over fiscal stimulus.

Despite Joe Biden emerging as the winner, Trump has not conceded. Instead, he has alleged voter fraud and mounted legal challenges in several swing State. This standoff over the US election outcome has led to doubts over fiscal stimulus anytime soon.

Overall the push and pull of negative and positive factors on the macro front may keep commodities choppy in the near term with markets awaiting final outcome of US elections as it may give some indication over size and timing of fiscal stimulus.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.