Global equities declined today as risk associated with the war in Ukraine intensified and a large nuclear plant was hit by Russia overnight. European equities declined the most, with the FTSE 100 down 3%, Euro Stoxx 50 down 4.69%, and CAC 40 down 4.68%. Energy companies in the U.S. have rallied as oil prices continue to rise, with Brent and WTI at $114.28/bl and $112.05/bl, respectively. NFPs were 678,000 in February, the highest since July, and the unemployment rate declined to 3.8%. The dollar firmed as investors looked to 98.654, the 10yr reached 1.697% at writing, but German 10yr yields are negative at -0.102%. The commodities rally will continue to pressure the Fed into higher rates, with oil prices set to reach $120/bl in the coming week and food prices also rallying.
LME metals finished the week with historical performance, with the LMEX index gaining as much as 6% since the end of February; the index is up 14.8% YTD, on course for the biggest even rise. Nickel advanced 9% testing appetite at $30,000/t and is now trading at $29,365/t. From the supply side perspective, many international companies that are yet to leave Russia are likely to wait further as the dust settles before deciding whether to withdraw business from the economy. In the meantime, major companies are faced with sharp reductions in exports. Indeed, Norilsk makes 17% of the world’s Class 1 nickel, high-quality material needed for batteries, which could compound additional pressures on already-struggling battery and carmakers in the longer term. While the world might find some of Russia’s supplies elsewhere, this shift would take time, further exacerbating the shortages in the near term. Stockpiles from the LME fell back to the lowest level since 2005. All other metals rallied, with copper breaking above $10,500/t to trade at $10,673/t at writing. Aluminium trades at $3,853/t and zinc settled at $4,051/t. Cash to 3monht spreads is backwardated except for lead which trades at -$4.25/t. Supply tightness and supply chain delays will be compounded, and the tightness in Europe is expected to be more profound due to reduced supplies and power costs.
Precious metals have also rallied as investors look for safe-haven assets; gold trades at $1,963.3/t and $25.62/t at the time of writing. Energy continues to push towards $120/bl, with Brent and WTI trading at $114.28/bl and $112.05/bl. European gas prices pushed towards 24.2%, up 179% YTD.
For more in-depth analysis of base and precious metals, please see our Quarterly Metals report.
All price data is from 04.03.2022 as of 17:30