Buoyant commodity prices drive global markets higher

All major global indices closed the week on a positive note on Friday with the US, European and Asian markets responding to positive news, particularly in relation to the potential uptick in the oil price ahead of this week’s OPEC meeting. Iron ore and base metals were also strong, providing further support. However, it would appear oil is the commodity that will be front and centre this week, and even after a 2.4% increase to US$50.50 on Friday, analysts expect further upside potential should production cuts be ratified.

In the US, the Dow increased 0.7% or 141 points to close at 20,804 points. While this represented a strong performance, the index still finished in negative territory on a week on week basis due to the sharp downturn on Wednesday. The index is now sitting more than 200 points below its high for the week of circa 21,030 points.

The NASDAQ gained 0.5% to close at 6083 points. Once again, this was well below its high earlier in the week of circa 6170 points.

The FTSE 100 rallied 0.5% to close at 7470 points, assisted by stocks in the resources sector and pharmaceutical sectors.

The DAX gained 0.4% to close at 12,638 points.

The Paris CAC 40 rallied 0.7%, closing at 5324 points.

Gold closed the week at US$1255 per ounce.

There was good support for iron ore as it rallied more than 1%, closing at US$62.69 per tonne.

There were also some strong performances across base metals with zinc being the standout, eradicating all of the week’s losses as it moved up to US$1.17 per pound, representing a daily gain of circa 3%.

This coincided with a sharp decline in 30 day London Metals Exchange zinc warehouse stock levels, perhaps indicating that the rally hasn’t finished.

Nickel also performed strongly, gaining more than 2% to US$4.22 per pound, a level it hasn’t traded at since the start of the month.

Copper spiked nearly 2% to US$2.56 per pound, as it also closed in on its high for the month of May.

Lead gained approximately 1% to close just above US$0.94 per pound. This makes it the most disappointing in terms of being able to pare back the losses that have materialised since falling from US$1.03 per pound start of May to a low of US$0.93 per pound on Thursday of last week.

The decline may be related to a sharp uptick in lead warehouse stock levels that has occurred during that period.

However, it could be a metal worth watching this week as warehouse levels only rose marginally last week compared with substantial weekly gains prior to that.

The Australian dollar is fetching US$0.745.

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