Commodity prices rally

Due to concern over China’s economic outlook, the Scotiabank Commodity Price Index lost further ground in September. It fell 2.6% month-over-month and 33.4% year-over-year.

But, commodity prices improved throughout October. “[Even] though commodity prices remain near a decade low, they rallied in October, rebounding with some easing in negative sentiment over China’s growth outlook,” says Patricia Mohr, vice president of Economics, and commodity market specialist at Scotiabank.

China’s third-quarter GDP growth, which was 6.9%, was slightly better than expected. Further, the country’s central bank has attempted to bolster global growth through easing monetary policy—its aim is to lift global equity markets, boost risk appetite across financial markets and support base metal prices.

Read:

• U.S. rate hike could weaken commodities
• Canada dodges recession, but BoC still dovish

What’s more, says Mohr, “The Trans-Pacific Partnership will deepen Canada’s trade ties in the Asia/Pacific region [and] cement the value of our NAFTA trade agreement. [That will] open up valuable new export markets for Canadian forest products, [with] the best prospects for expanded trade in lumber and panel boards [being] Japan, Malaysia and Vietnam.”

Read: Wait for commodities opportunities

Other highlights from the commodity report include:

• the Oil & Gas Index led commodity prices lower again in September (-5.2% m/m and -58.4% yr/yr). While light, sweet crude oil edged up in Edmonton, Western Canadian Select (WCS) heavy oil dropped from US$29.33 to US$26.32 per barrel—that’s close to the 2008-recessionary low of US$22.91. While WCS heavy oil prices have rallied moderately throughout October, WTI oil (the key reference price for North America) is range bound at about US$46. The market is still waiting for a significant international supply-side adjustment to low oil prices.
• Glencore has cut zinc production, tightening supply and demand conditions and boosting the outlook for zinc prices in 2016 and 2017. Prices could jump to between US$1.25 and 1.35 per pound in 2016, and even higher in 2017.
• China’s Central Committee met this week to set out its 13th Five-Year Plan, a blueprint for economic and social development between 2016 and 2020.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.