The most widely followed commodities index, the Reuters/Jefferies Commodities Index (CRB), closed below its 2009 Global Financial Crisis low last week:
(The CRB closed even lower yesterday due to declines in crude oil and copper)
An interesting excerpt from a recent Morgan Stanley research note:
“We also think it’s important to consider the possible positive signals of China’s currency devaluation. The government has already implemented a number of easing measures, and the latest currency intervention may simply be a preemptive measure to protect the competitive position of many of China’s exporters as the Fed is set to raise rates (implying a stronger USD). In other words, China has embarked on pro-growth measures. We also wonder whether this could be a precursor to more stimulus (either fiscal or monetary) and stronger domestic demand, especially on the industrial/manufacturing side of the economy. Given that positioning and sentiment around China and growth is already so low, any positive news on Chinese growth could be bullish for commodity prices.”
Given the dire outlook during February 2009, it’s hard to believe that things are worse for commodities now than they were then. However, one thing is for certain: China is the key commodities market mover and all eyes will continue to be focused on clues to Chinese growth, or lack thereof.