Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Commodity Price Surge Could Prompt Inflation Spike

By CMC Markets (Michael Hewson)CommoditiesApr 19, 2018 08:03
Commodity Price Surge Could Prompt Inflation Spike
By CMC Markets (Michael Hewson)   |  Apr 19, 2018 08:03
Saved. See Saved Items.
This article has already been saved in your Saved Items

European equity markets posted another positive session yesterday, with the FTSE100 leading the way helped mainly by a surge in basic resource stocks, as metals prices soared on the back of concerns that other producers could be added to the US sanctions list of Russian companies.

Nickel, aluminium, copper and platinum prices all rose strongly, while oil prices also made new three-year highs, helping push the CRB index to a similar multiyear high, on chatter that Saudi Arabia wouldn’t be unhappy to see oil prices move as high as $100 a barrel, probably so that they can push the Aramco IPO out of the door, at the highest possible valuation.

US markets also finished the day higher, though the Dow got dragged lower by IBM (NYSE:IBM) as investors reacted badly to the company’s forward outlook.

The Fed’s latest Beige book survey painted a broadly positive picture of the US economy, though there was concern about rising tariffs and the effect they might have on the broader outlook.

This helped push US short term yields higher with the 2-Year hitting 2.43%, bringing it even closer to the 10-Year yield which closed at 2.875%, flattening the yield curve even further.

You would think that investors would start to worry about the inflationary effects of the sharp rises being seen in commodity prices in recent weeks than the effects of some tariffs that haven’t even been fully implemented yet.

Turning to the UK, for the most part of this year it’s been difficult to escape the steady drip, drip, drip of bad news from UK retail with profit warnings from across the retail sector at a seven-year high.

High profile names including Toys ‘R Us, Debenhams Plc (LON:DEB), Maplins, Mothercare, Moss Bros (LON:MOSB), Carpetright (LON:CPRC), Kingfisher (LON:KGF), New Look, either going into administration or reporting difficulties, the list goes on with even high street mainstay John Lewis (LON:JLH) warning about falling sales, amidst reports of job losses in the thousands, across the entire sector in the first three months of this year alone.

There have been notable success stories, with this week’s news from JD Sports (LON:JD) and Primark, owned by Associated British Foods (LON:ABF) posting some fairly decent updates, but they tend to have been the exception.

Against this sort of backdrop, you would tend to expect to see consumer spending patterns take a little bit of a hit, and while it is no secret that consumers in the UK are more price sensitive, they’ve shown little sign of reining back spending significantly so far this year.

Today’s retail sales numbers for March could of course shatter this perception of consumers feeling a little better about their spending habits.

So far this year consumers have been in a fairly cautious mood with retail sales in January and February rising 0.1% and 0.8% respectively. This morning’s March numbers could reverse all or most of these gains with expectations of a decline of 0.5%.

This would be at odds with last week’s British Retail Consortium numbers which saw a rise of 1.2%, which when compared to a disappointing services PMI report for March paint a rather confusing picture for the month. Today’s numbers are also likely to be affected by weather related factors given the freezing weather seen throughout the month.

On an annualised basis we can expect to see an improvement from 1.2% to 2%.

EURUSD – watching paint dry with resistance above the 1.2400 area and support at the 1.2320 level, within the broader range of 1.2200/1.2500 range which continues to dominate. We need to see a break below 1.2160 or a break above 1.2540 to suggest a strong move in either direction.

GBPUSD – appears to have made a new short-term peak at 1.4376 slipping back below the 200-week MA at 1.4250 yesterday. This failure to follow through higher could see a deeper move lower towards the 1.4080 area in the short term and even a retest of the April lows at 1.3970.

EURGBP – move back through the 0.8690 area yesterday after finding support at the 0.8620 area. This could well act as support for now for a move back to the 0.8750 area. We need to see a move back above 0.8750 to suggest a retest of the 0.8800 area.

USDJPY – while above the 106.60 area and last week’s lows, the risk remains for a move back towards the 108.20 area. The 105.20 area also remains a key support with a break below 105.00 opening up a move towards 103.00.

FTSE100 is expected to open 7 points higher at 7,324

DAX is expected to open 15 points higher at 12,605

CAC40 is expected to open 10 points higher at 5,390

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original post

Commodity Price Surge Could Prompt Inflation Spike

Related Articles

Ipek Ozkardeskaya
Strong Dollar Weighs On Gold By Ipek Ozkardeskaya - Jul 08, 2022

Sentiment is mixed. The S&P 500 eked out small gains after a volatile session. The FOMC minutes, released yesterday, came as a confirmation that the Federal Reserve (Fed) remains...

Commodity Price Surge Could Prompt Inflation Spike

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email