Commodity Prices Soar

March 7, 2022

The prices of WTI oil and wheat — the two main exports of Ukraine and Russia — have posted overnight jumps of 6.2% and 7% as Nato allies are reportedly considering an embargo on imports of Russian energy. Gold briefly poked above $2000 per ounce overnight for the first time in a year and a half but settled back under that threshold to show a current overnight gain of just 1.3%.

The dollar spiked another 12% higher against the Russian ruble. The dollar has also garnered strong gains of 1.0% against the Turkish lira and 0.8% relative to the Mexican peso but has slipped 0.3% against commodity-sensitive currencies like the New Zealand and Australian dollars.

The DXY weighed dollar index touched 99.42 overnight, its strongest level since May 17, 2020 but is currently trading close to the bottom of its overnight range and thus only fractionally higher on balance. The U.S. currency is up 0.3% relative to the yen, euro, and sterling.

Trading on Russia’s stock exchange continues to be suspended. In other stock market action, share prices closed down 3.2% in Taiwan, 3.9% in Hong Kong, and 2.3 in South Korea, three countries that like Ukraine have been politically threatened by highly militarized neighbors. Equities also tumbled 2.9% in Japan, 2.2% in China, 2.7% in India, 2.0% in Malaysia, and 1.0% in Australia. European bourses are down so far today by 1.5% in Germany and Switzerland, 1.2% in France, and 0.7% in Great Britain, and U.S. stock futures point to a lossĀ  of about three quarters of a percent.

The price of a Bitcoin, which theoretically is touted to do well at scary geopolitical times like the present, is instead struggling, with an overnight drop of 1.8% and a slide of 19% from its 2022 high and 44% from its 52-week peak.

Ten-year sovereign debt yields have risen four basis points in Germany and the United states and by seven bps in Great Britain, but the 10-year Japanese JGB yield, by contrast, is a basis point lower.

Chinese and Japanese foreign exchange reserves declined in February. China’s reserves dropped $8 billion to a 5-month low of $3.214 trillion, and Japanese reserves of $1.359 trillion were at an 8-month low and some $20 billion less than a year earlier.

China’s trade surplus of $115.95 billion in January-February was some 15% greater than projected and 22% wider than a year earlier. Exports grew faster than expected, while import growth undershot forecast.

German retail sales, which because of Omicron had dived 5.5% on month in December, recovered 2.0% in January. Their 12-month rate of rise set a record high of 10.3%. A 1.8% monthly rise in German industrial orders beat expectations and resulted in a 4-month high 7.3% advance from January 2021. Export orders accounted for all of January’s monthly increase. Domestic orders fell in the month.

The Sentix gauge of investor sentiment toward the euro area economy slumped this month to a 16-month low of -7.0 compared to readings of 16.6 in February and 29.9 last July.

Britain’s Halifax house price index posted a 10.8% year-on-year rise in February, its largest 12-month advance in 176 months.

Austrian wholesale price inflation accelerated 0.8 percentage points to a 3-month high of 16.3% in February, which represents a huge swing from a 7.9% drop during the 12 months through May 2020.

The Baltic countries that are independent now but were part of the Soviet Union are closely watching the war in Ukraine. Estonian CPI inflation last month of 12.0% was 0.7 percentage points higher than in January and just shy of December’s record 12.2%.

Danish industrial production rose 1.2% on month in January, but its on-year increase slid back to a 4-month low of 9.8%. In Norway, industrial production went up 0.9% in January but only 0.2% versus its year-earlier level. That was the smallest 12-month rate of rise in 14 months.

The AIG-compiled Australian purchasing managers index for the services sector improved to a strong reading of 60.0 in February, which represents a 9-month high.

But Mexican consumer confidence stagnated in February at January’s 5-month low and sub-50 reading of 43.4.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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