August 10, 2012

Week In Review: Gold Atop Price Range, Corn Hits Record, Oil Near 3-Month Highs, NatGas Consolidates

Details

We examine the latest developments in commodity markets and the week’s performance.

Last Friday’s strong employment report kept the bias in commodity markets to the upside, but disappointing data from China at the end of the week spurred a mixed reaction.

Stocks hit new three-month highs, as measured by the S&P 500. The index rose by less than 1 percent on the week to 1400 and is now up 11.33 percent year-to-date.

Macroeconomic Highlights

On Thursday, China said that industrial production growth in the country slowed from 9.5 to 9.2 percent in July, the slowest rate since April 2009. Growth in retail sales slowed from 13.7 to 13.1 percent in July, the slowest rate since February 2011.

Exports in the month grew by only 1 percent, well below the 8 percent anticipated and the slowest rate since January. Imports rose by 4.7 percent, below the expected 7 percent.

On the surface, slowing growth is bearish, as it reduces China's appetite for commodities. However, it also compels the government to do more to support the economy through stimulus and the easing of monetary policy, which could boost growth down the line.

Indeed, China's consumer price index grew by only 1.8 percent year-over-year in July—the slowest rate since January 2010—giving the People's Bank of China ample room to cut interest rates without fear of stoking high inflation.

Commodity Wrap