Commodity markets sees downward trend

ISTANBUL

Commodity markets saw a downward trend last week, leaving behind a week of selling pressure.

Uncertainties over economic activity continue to affect commodity markets, while concerns over monetary policies and mixed signals from macroeconomic data and financial results of companies continue to have an impact on asset prices.

After the Fed said at its last meeting that they would take more data-based steps, according to data released last week, non-farm payrolls grew 187,000 people in July, below expectations, while the unemployment rate fell from 3.6% to 3.5%.

Analysts noted that although non-farm payrolls remained below expectations, the labor market still remained tight, exacerbating uncertainty about the future Fed policies.

International credit rating agency Fitch's downgrade of the US' long-term credit rating from AAA to AA+ was another important factor that reduced the risk appetite in the markets.

Gold ended the week with a loss of 0.8%, with silver down 2.9% and platinum down 1.4%, while palladium was up 1.1%.

Gold declined as concerns about the growing budget deficit in the US and strong economic data pushed bond yields higher.

According to the World Gold Council, global gold demand in the second quarter of 2023 fell 2% on a yearly basis to 921 tons.

A mixed course was observed in energy commodities: Brent oil ended the week up 1.8%, while natural gas lost 2.2%.

The rise in Brent oil prices was driven by supply concerns that gained ground in the markets after Saudi Arabia and Russia's decisions to cut oil production.

Saudi Arabia extended its one million barrels per day cut, which started in July and extended in August, to cover September.

With this decision, the country's total daily production will reportedly drop to 9 million barrels in September, and the cut may be extended after September.

Russian Deputy Prime Minister Aleksandr Novak also announced that Russia would continue to voluntarily reduce oil exports, and that oil supply would be cut 300,000 barrels per day in September.

The prediction of a decline in US oil stocks also played a role in the rise of oil prices.

The American Petroleum Institute announced that the country's crude oil stocks were estimated to have dropped 15.4 million barrels in the previous week.

- Copper prices down more than 2%

Last week, copper lost 2.1%, lead 1.4% and nickel 5%, while aluminum and zinc gained 0.1% and 1.3%, respectively.

Weak economic data released in China played an important role in the selling pressure on base metals.

In China, the Caixin manufacturing industry Purchasing Managers Index (PMI) fell to 49.2, meaning the country’s manufacturing sector has contracted for four straight months.

Although Chilean copper mining firm Codelco lowered its production forecasts and the Chilean Statistics Authority reported that copper production in June fell 0.9% compared to the previous year, developments in economic activity had a greater impact on the metal.

- Losses in wheat top 10%

Wheat traded on the Chicago Mercantile Exchange lost 10.1%, corn lost 6.2% and soybeans 3.7%, while rice gained 2%.

Despite the escalating tensions between Russia and Ukraine, the rise in production forecasts dampened wheat and corn prices.

The decline in world rice production forecasts pushed up prices.

Brazil's Commerce Ministry announced that soybean exports from Brazil rose 32% year-on-year in July, reaching 9.9 million tons.

Cotton followed a flat course, while cocoa lost 0.8%.

Sugar rose 0.4% and coffee 2.2%.

Rising concerns over sugar supply along with the rise in oil prices led to an increase in sugar prices.

Continued tightness in coffee supply in Brazil and the decline in coffee exports in Vietnam pushed up coffee prices.

*Writing by Gokhan Ergocun