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General Market Commentary
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General Market Commentary
Commodity prices, investment poised to extend upswing
LONDON (Reuters) - A rebound in commodities prices and investment is poised to extend in coming months as the sector gets its traditional boost during the final stages of the global economic cycle along with other drivers.
While some investors worry about a possible recession, commodities are due to benefit from an expected U.S.-China trade deal, tightening oil supply and potential short-covering in beaten-down U.S. grain futures.
The 19-commodity Thomson Reuters/Core Commodity CRB Index, which has rebounded 10 percent from an 18-month low touched at the end of last year, should also get further support from easier monetary policy that has lifted all financial markets, analysts and traders said.
Graphic: Commodity Prices Clawing Higher From December Lows
Commodities along with other financial markets have been buoyed after the U.S. Federal Reserve this month confirmed its three-year drive to tighten monetary policy was at an end.
The dovish change from the Fed and growing stimulus in top commodities consumer China would extend the current positive economic cycle and support commodity prices, JPMorgan said in a note.
“Late cycles are typically marked by outperformance of commodities,” JPMorgan analyst Dominic O’Kane said.
The rise in commodities so far has been partly fueled by hopes for an agreement to end a trade war between Washington and Beijing, helping to spur $2.1 billion of flows so far this year into commodity index funds and exchange-traded funds, data compiled by Citi showed.