2023 Commodities Forecast by Solidecn.com

UK Housing Market Sees Hope: Latest Trends in House Prices

In recent months, the housing market in the United Kingdom has seen a notable shift. As of November 2023, the Nationwide House Price Index, a key indicator of house price trends, reported a year-on-year decrease of 2%. This figure is particularly interesting as it's the smallest drop in house prices we've seen in the past nine months, since February. What's more, this reduction is less than what experts had predicted, which was a decline of 2.3%.

Month-on-Month Changes and Economic Impacts
If we look at the month-to-month changes, there's a small but positive sign. House prices in November edged up by 0.2% compared to October, which itself had seen a 0.9% increase. This upward trend, albeit slight, is a change from the continuous decline observed over the past ten months.

The Role of Interest Rates

A key factor in this scenario is the change in interest rate expectations. These expectations have recently gone down, leading to a decrease in longer-term interest rates. This is important because these rates heavily influence the pricing of fixed-rate mortgages, a common choice for homebuyers.

Robert Gardner, Nationwide's Chief Economist, commented on this development. He believes that if these trends continue, they could significantly ease the financial burden on potential homebuyers. This easing could, in turn, revive activity in the housing market, which has been somewhat subdued in recent times.

Economic Assessment: Beneficial or Detrimental?

When assessing the economic implications of these developments, it's a mixed bag. On one hand, falling house prices can indicate a weakening economy and lower consumer confidence. On the other hand, a slower decline in prices, along with reduced interest rates, could encourage more people to enter the housing market, potentially stimulating economic activity. This could be beneficial for the economy, as a robust housing market often reflects and contributes to overall economic health.
 
Soybean Futures Hit One-Month Low Amid Brazil Rain Forecast

Soybean futures have recently dipped to their lowest point in a month, falling below $13.2 per bushel. This decline is largely attributed to the forecasted rain in northern Brazil, which brings hope for better crop conditions. Despite Brazil's harvest projections being reduced due to the ongoing drought, there's an anticipation of an overall increase in production compared to last year.

Stonex, an agribusiness consultancy, has adjusted its prediction for Brazil's 2023/24 soybean crop to 161.9 million metric tons, a slight decrease from its earlier estimate of 165.03 million tons. Similarly, Patria Agronegocios, another consultancy firm, estimates Brazil's soybean production at 150.67 million metric tons. This figure is a reduction from the previous season's 154.10 million, mainly due to drought conditions in major producing areas.

On the demand side, the US Department of Agriculture has reported private sales of 132,000 metric tons of US soybeans to China. Additionally, they confirmed the sale of another 198,000 tons to unspecified destinations. These transactions are set for the 2023/24 marketing year, which commenced on September 1.​
 
Canadian Stocks Dip Slightly on Commodity Price Declines

On Monday, Canadian stocks saw a slight downturn. The S&P/TSX Composite Index dropped a bit, staying close to the 20,500 level. This mild decline comes after reaching a ten-week high in the previous session. The fall can be attributed mainly to a significant drop in commodity prices at the start of the week. This decline particularly affected the index, which is heavily influenced by commodities.

Major energy companies felt the impact of falling metal and oil prices. Canadian Natural Resources saw a 1.6% decrease, Suncor Energy went down by 1.1%, Cenovus Energy also dropped by 1.6%, and Imperial Oil experienced a slight 0.2% loss. In the basic materials sector, there were noticeable declines as well. Wheaton Precious Metals led the way with a 1.9% fall, followed by Agnico Eagle Mines with a 1.5% drop, and Barrick Gold losing 0.8%.

However, the banking sector provided some stability. Royal Bank stood out with a 0.3% gain, TD Bank followed with a 0.4% increase, and Bank of Montreal rose by 0.9%, helping to offset further losses in the market.​
 
European Stocks Steady as Investors Await Key Data

European stock markets showed little change on Tuesday, pausing after their recent strong performance which saw key indexes reach four-month highs. The STOXX 50 and the broader STOXX 600 both experienced a minor decline of 0.1% during morning trading. Investors are closely watching a range of economic data, including final PMI figures, Eurozone producer prices, and US job openings set to be announced later in the day.

In corporate news across Europe, several developments are drawing attention. Brenntag, the German chemical distributor, is hosting its investor day. Barclays is in the spotlight after Qatar Holding sold around £510 million of its shares at a 1.4% discount compared to Monday's closing price. Additionally, SSP Group, known for operating eateries, has resumed paying out its annual dividend. Meanwhile, pub group Marston's reported a 28% increase in annual profit, lower than expected, although its Christmas bookings have already surpassed last year's numbers.​
 
How OPEC+ Cuts and Middle East Conflict Affect Oil Prices

Solid ECN – Oil prices continue to go down to $72.3 per barrel on Tuesday, the lowest since five months ago. This is because people are not sure if the OPEC+ group can reduce the oil supply enough and they are worried about the lower demand for energy due to weaker data in big economies.

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Last week, some OPEC+ members, such as Saudi Arabia, UAE, and Kuwait, said they would cut more oil supply by 2.2 million barrels per day, but some members have not agreed yet. Saudi Arabia's energy minister also told Bloomberg on Monday that the OPEC+ group might keep cutting the oil supply after the first quarter if needed. However, traders are still nervous about the rising conflict in the Middle East, especially the increased fighting in Gaza over the weekend.​
 
Gold Technical Analysis

Gold has been stabilizing its price above the Ichimoku cloud as expected. The pair is currently trading in a narrow range between $2,009 and $2,039. The direction and magnitude of the next breakout are crucial for the future trend.

If the XAUUSD price breaks above the upper boundary of the range, the bulls will have a clear path to the 23.6% resistance level at $2,078.

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On the other hand, if the price falls below the lower boundary of the range, the bears will try to push it back into the Ichimoku cloud and test the support level at $1,984. The market sentiment and the global economic outlook will likely influence the price movement of gold in the coming days.​
 
Cotton Futures Reach New Heights Amid Supply Concerns

Cotton futures recently hit a high not seen in over a month, climbing above 82 cents per pound. This surge, the most significant since late October, comes as traders face concerns over the short-term availability of cotton. Recent data from ICE reveals a sharp decline in certified cotton stocks. On December 5th, stocks available for delivery against futures contracts were at just 6,325 bales, a significant drop from the two-year high of 87,770 bales recorded on December 1st.

Adding to these supply worries, the Cotton Association of India (CAI) has lowered its forecast for the 2023/2024 cotton season's production to 29.4 million bales. This downward revision is due to the impact of the pink bollworm infestation in Haryana and the fact that many farmers have been forced to uproot their plants.

In other developments, Brazil reported its cotton export figures for November. The country shipped 253.71 thousand tons of cotton, indicating a 12% increase from October 2023. However, this figure represents a 5.5% decrease when compared to the exports in November 2022.​
 
China Experiences Steepest Food Price Fall Since 2021

In November 2023, the cost of food in China experienced a notable decrease, dropping by 4.2% compared to the same time last year. This decrease in food prices was more significant than the 4.0% drop observed in the previous month. In fact, this trend of falling food prices has been ongoing for five consecutive months, marking the most rapid decline since September 2021.

A key factor in this decline was the dramatic fall in pork prices, which went down by 31.8%, surpassing the 30.1% decrease seen in October. This larger drop in pork prices was unexpected and is thought to be due to a combination of unusually warm winter weather and a continued adequate supply following the Golden Week holiday in early October. In addition to pork, other food items also saw price reductions, including cooking oils (down by 4.1%), eggs (decreasing by 8.8%), and milk (a slight decrease of 0.3%).

However, not all food categories followed this downward trend. Fresh vegetables, for example, saw a slight increase in price (0.6%), reversing the previous month's decline of 3.8%. Similarly, the cost of fresh fruit accelerated, with prices rising by 2.7% compared to a 2.2% increase in the previous month.

In terms of the economic impact, this trend of falling food prices can have mixed effects. On one hand, lower food prices can benefit consumers by reducing their living expenses, potentially increasing their disposable income and encouraging spending in other sectors. On the other hand, for producers and farmers, falling prices can reduce income and profitability, possibly leading to challenges in the agricultural sector. Overall, the impact on the economy would depend on the balance between these consumer and producer effects.​
 
Egypt's Inflation Eases, Food Prices Slow Down

In November 2023, Egypt saw its annual urban inflation rate decline for the second consecutive month, reaching a six-month low at 34.60%. This decrease from October's 35.8% rate follows a record peak in September of 38.0%. The current rate remains well above the Egyptian central bank's target range of 5-9%, yet it still surpasses the anticipated market forecast of 34.8%. A contributing factor to this development is the reduced pace of food inflation, which fell to 64.5% from 71.3% in October. On a monthly basis, consumer prices experienced a 1.3% increase, a slight acceleration compared to October's 1.0% rise, which was the most modest in over a year.​
 
Italian Stocks React Cautiously as FED Rate Decision Nears

On Wednesday, the FTSE MIB, Italy's stock market index, experienced a slight uptick, reaching the 30,400 mark. This movement was in line with other European markets, as investors are keenly waiting for the Federal Reserve's decision on interest rates, expected later today. In the corporate arena, Amplifon took the lead, with its stock climbing 1.8%. This jump came after the company's successful expansion into Uruguay by acquiring the Audical group. Prysmian and Erg also showed strength, each rising over 1%.

However, not all shares fared well. Iveco Group and Banco BPM faced downturns, both dropping by 1.5%. Banco BPM's decline was particularly influenced by updated evaluations from various investment banks regarding its business plan for the next few years. Additionally, Ferrari's shares dipped slightly by 0.3% after HSBC downgraded its rating from 'buy' to 'hold', despite increasing the price target from 325 to 340 euros.​
 

Sensex Shatters Records with New Peak

Solid ECN – The Indian stock market experienced a remarkable surge, with the Sensex, a major stock market index, reaching an unprecedented high. Early on Thursday, it soared by 910.0 points, a 1.3% increase, setting a new record at 70,548.4. The Nifty index also performed impressively, surpassing the 21,100 mark. This surge was primarily influenced by a positive trend in Wall Street, which followed the Federal Reserve's decision to maintain its interest rate for the third consecutive time. Moreover, the Fed hinted at the possibility of rate cuts in the coming year.

The BSE Sensex, which had a rather quiet performance on Wednesday, rebounded with significant gains. These gains were mostly seen in sectors like IT, real estate, banking, and financial services. Investors are now keenly anticipating data from China, expected on Friday. This data includes important metrics like retail sales and industrial output for November 2023.

Market participants are also looking forward to the release of India's wholesale price figures for November. There's a general expectation that India's wholesale prices might register a rise for the first time in eight months. Among the stocks that saw early gains were LTMindtree with a 3.0% increase, HCL Tech with a 2.8% rise, and Bajaj Finance also up by 2.8%. State Bank of India (SBI) also saw a 1.2% increase after its announcement of entering into a significant Line of Credit with the German Development Bank KfW, aimed at supporting solar projects in India.​
 

Historic Rise in European Stocks After Fed Maintains Rates​

Solid ECN – European stocks experienced a significant boost on Thursday, reaching new heights after the US Federal Reserve's decision to maintain current interest rates. This announcement also came with an unexpected revelation: plans for three interest rate reductions in 2024, more than previously anticipated in September. This news sent the STOXX 50 index soaring by 1%, reaching a remarkable 23-year high of 4,585 points. Meanwhile, the wider STOXX 600 index also reached its highest level since January 2022.

The Federal Reserve's future plans, detailed in its "dot plot", suggest an even more aggressive rate reduction strategy. They foresee four cuts in 2025 and another three in 2026, aiming to lower the federal funds rate to between 2% and 2.25%. This approach is part of the Fed's strategy to avoid the risk of maintaining excessively high rates for an extended period, as emphasized by Fed Chairman Jerome Powell.

Investors are now keenly awaiting further monetary policy updates, particularly from the European Central Bank and the Bank of England, expected later on Thursday. These announcements are highly anticipated, as they could further influence global market trends.​
 
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