FED and PBOC add momentum to commodities market rebound FED and PBOC add momentum to commodities market rebound FED and PBOC add momentum to commodities market rebound

FED and PBOC add momentum to commodities market rebound

Ole Hansen

Head of Commodity Strategy

Key points

  • The commodities sector remains on track for a third consecutive weekly gain
  • In the past week the sector has been supported by adverse weather, FOMC rate cut and now additional stimulus in China
  • Demand dependent commodities from copper and iron ore to crude oil showing strong gains today

The commodities sector remains on track for a third consecutive weekly gain, and following an early September energy-led slump, the Bloomberg Commodity Total Return Index has recovered strongly to reach a two-month high, in the process recouping more than half of what it lost during the May to August correction. The index, which is replicated by several major ETF providers, as shown below, tracks a basket of 24 major commodity futures. It trades up 4.4% on the month (5.4% year-to-date), with all sectors showing a positive performance this month. This includes the energy sector, where losses in crude and fuel products following the early September slump are being offset by a +15% rally in natural gas, as a storm in the Gulf of Mexico threatens to disrupt production.

Besides sugar and coffee, both recording solid gains this month amid extreme weather conditions in Brazil and Vietnam fueling crop concerns, the commodities sector as a whole has been presented with two potential demand-supportive developments. Starting with last week’s bumper 50% rate cut from the Federal Reserve, the first of several, reducing the cost of holding and financing inventory, while also reducing the risk of a demand-damaging recession. This was followed up in China today, when the People’s Bank of China unveiled a broad package of monetary stimulus measures to revive the world’s second-largest economy and top consumer of raw materials. The move underscores mounting worries within the government over slowing growth and very muted consumer confidence.

Source: Saxo

The announcement has so far today triggered a strong response across growth-dependent commodities, from copper and iron ore to crude oil. Copper trades up 2.7% at USD 4.46 per pound, a two-month high, while iron ore futures in Singapore, the steelmaking stable, jumped 6.5% after the PBOC, as part of the support package, lowered borrowing costs on up to USD 5.3 trillion in mortgages. Crude trades back above key levels, which, once broken earlier this month, triggered a sharp sell-off that helped cause the first ever recorded short position held by hedge funds.

High Grade Copper futures - Source: Saxo
Brent Crude Oil - Source: Saxo

Recent commodity articles:

23 Sept 2024: COT: Dollar short reduced; Investment metals see strong demand ahead of FOMC
20 Sept 2024: 
Commodity weekly: Commodities boosted by bumper rate cut
20 Sept 2024 
Video: Gold or silver, which metal will perform the best 
17 Sept 2024
With gold reaching new heights, silver shows potential
16 Sept 2024COT: Record short Brent and gas oil positions add upside risks to energy
11 Sept 2024: 
Crude slumps amid technical selling and recession fears
10 Sept 2024: 
US Election: will gold win in all scenarios
9 Sept 2024: 
COT: Crude long cut to 12-year low; Dollar short more than doubling
5 Sept 2024: 
Can gold overcome the 'September curse'?
4 Sept 2024: 
Wheat rises on European crop worries
3 Sept 2024: 
Chinese economic woes drag down crude oil and copper
2 Sept 2024: 
COT: Commodities see broad demand as the USD slumps to a net short
30 Aug 2024: 
Commodities sector eyes fourth weekly gain amid softer dollar and Fed expectations
27 Aug 2024: 
Month-long sugar slide pauses amid concerns of Brazil's supply
27 Aug 2024: 
Libya supply disruptions propel crude prices higher
26 Aug 2024: 
COT: Funds boost metals investment as dollar long positions halve amid weakness
23 Aug 2024: 
Commodities Weekly: Metal strength counterbalancing energy and grains
22 Aug 2024:
 Persistent supply contraints keep cocoa prices elevated
21 Aug 2024: 
Weak demand focus steers crude towards key support
19 Aug 2024: 
Resilient gold bulls drive price to fresh record above USD 2500
19 Aug 2024: 
COT Buyers return to crude as gold stays strong; Historic yen buying
16 Aug 2024: 
Commodities weekly: Gold strong as China weakness drags on other markets
9 Aug 2024: 
Commodities weekly: Calm returns to markets, including raw materials

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.