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The American elections are behind us! Trump is the winner, and it is now interesting to follow the reactions in the markets, from financial to commodity ones. It will take some time for the situation to stabilize and for us to see what the real effects of these elections are on commodity price movements. For now, we can only speculate based on this little data, or rather on the movements in this short period.
Stock markets are all pushing new peaks, the US dollar is rising, bitcoin as well, and many FX pairs are suffering from a strong dollar. The DJIA and SP500 achieved all-time records on Friday, with the SP500 rising above six thousand points! With Trump, it seems this trend will continue. The economic direction of the US still has many different paths it can take under Trump 2.0. Will we see further inflation? Tax cuts? The impact of immigration? Changes in FED policy?
But at the end of the day, it seems the market is functioning with a bit more confidence compared to Trump 1.0. Traders would still prefer a continuation of tax cuts alongside a growing economy that is not affected by inflation! Chinese equity capital has fallen lower, as traders fear a weaker Chinese economy as a result of all this. There are always questions about what kind of stimulus can be expected? Now with Trump, the increase in rates gives China an even tougher task to offer incentives. The US FED has reduced rates by 0.25 percent as expected.
The US Treasury spends about three percent of GDP on interest payments on national debt, the highest ratio since 1996. The national debt is close to 36 trillion dollars. The new administration in the White House will favor an increase in the US deficit with the risk of renewed inflation growth. The deficit is rising because the US has to pay more than one trillion dollars annually in interest. The outcome of the presidential elections in the US, at the economic level, can have significant consequences on the exchange rate and agricultural products, while it seems obvious that rates will continue to fall, albeit slower than in recent months.
However, the market structure will not change, and it will not be changed by the new/old tenant in the White House. FIAT money will continue to lose purchasing power, devalue, until its demise. The market is wisely betting on other horses, and after recent rises in gold and silver, it is now bitcoin’s turn, spurred by the great possibility that it will become a store of value for the US Treasury. Over the weekend, bitcoin, the alter ego of FIAT currency, reached a new all-time high of over 80 thousand dollars, with an increase of more than 16 percent in the last seven days. The growth continues at the beginning of the new week.
Volatile Oil
When it comes to oil, futures prices rose about one percent last week, continuing a period of volatility that has lasted for four weeks. If the beginning of the week is any indication, then we are facing a bearish week regarding oil prices. It seems the market is caught between traders’ hopes for accelerated growth in the US economy and fears of weakness in the Chinese economy and consequently falling demand. Due to Trump and generally his business-friendly stance, traders’ optimism is rising. Everyone hopes that he will stimulate economic growth with his policies. Such expectations were supported by the FED leaders’ decision on further rate cuts.
On the other hand, traders are concerned about the decline in Chinese oil imports in October, the ninth consecutive month, down nine percent compared to the same month last year. The Chinese economy has been growing slower than expected for some time, and traders fear that even new monetary and fiscal stimulus measures from Chinese authorities will not significantly impact economic growth, and thus demand. Demand for oil in the US is not currently impressive either. US oil inventories rose by 2.1 million barrels last week. Additionally, concerns about supply disruptions due to storm Rafael in the US Gulf of Mexico have eased. Eventually, Trump’s ‘tightening’ of sanctions on Iran and Venezuela and escalating tensions in the Middle East could support price growth. Overall, a mix of conflicting information and factors is alternating in its impact on oil price movements, making the trend unclear.
European natural gas futures prices TTF rose to €43.8/MWh, the highest level since November 2023, driven by colder weather forecasts and increased concerns about storage levels. With falling temperatures, gas reserves are depleting faster, and gas storage capacity in the EU is now at 93 percent full, which is lower than usual for this time of year. This contrasts with last year when storage levels were nearly full. On the supply side, gas flows to Europe and the UK have slightly increased, supported by higher exports from Norway and steady deliveries from Russia via Ukraine. Meanwhile, European imports of liquefied natural gas (LNG) jumped 17 percent compared to the previous month, likely due to efforts to replenish stocks before winter.
How important are commodities in today’s world? At the beginning of November, Russia closed the gas pipeline to Austria, Poland, and Bulgaria because they refused to pay in rubles. After two hours, Poland agreed to pay for gas in rubles. After another four hours, Austria and Bulgaria agreed to pay for gas in rubles. Another hour passes, and the European Commission authorizes European countries to buy gas in rubles. Russian gas exports to Europe increased by 15 percent in the first 10 months of this year. The US still pays Russia a billion dollars annually for enriched uranium, which is used in nuclear reactors that supply the country with about one-fifth of its energy needs.
Both India and China have made it clear that they will not follow the British example and will not close coal-fired power plants anytime soon. Coal energy provides cheap energy that Chinese and other Asian manufacturers of components and equipment for wind and solar energy (not to mention electric vehicles) use to keep their products affordable. These two countries will stimulate demand for coal in the short and medium term.
Stable Copper Prices
In October, the FAO world food index closed at 124.9 points. An increase of two percent compared to September, 5.5 percent compared to October 2023, and the largest increase in 18 months. Vegetable oils stood out positively, rising by 7 percent compared to September, milk and its derivatives, rising by 2 percent, grains weaker, rising by 0.8 percent, and meat, which fell by 0.3 percent.
In the agri world, the USDA report did not have a significant impact on prices, but there are other signals that should not be underestimated. On Friday, WTI oil lost 2.67 percent, and the dollar continued its march towards 1.06 against the euro. Two factors are falling for star agricultural products. Consequently, funds are rebuilding their short positions, with the most significant being those on soybeans and wheat Matif, while long positions were created in corn, rapeseed Matif, and soybean oil.
Interestingly, soybean prices on the CBOT are rising! Generally, global vegetable oil prices are rising, the USDA showed lower national yields in the US last Friday, and importers are rushing for new Trump tariffs for 2025. Bearish traders on soybean grain are wondering how long this optimism in the markets can last, especially ahead of the massive Brazilian crop and sales by farmers in the US. On the other hand, bullish traders are happy to see demand.
Copper futures prices stabilized around $4.3/lbs after a turbulent week, as investors continued to assess economic prospects in China and the potential impact on the market of Donald Trump’s election as US president. China announced a debt package of 10 trillion yuan on Friday aimed at alleviating financing for local authorities and supporting its slow economic growth.
However, the lack of direct economic stimulus measures disappointed investors, refocusing attention on the risks of higher tariffs and rising tensions between the US and China under Trump’s administration. Additionally, data released over the weekend revealed persistent deflationary pressures in China, further diminishing the demand outlook for copper, the most widely used industrial metal in the world.
