The bailout of Cyprus has once more put nerves on end in Europe, meanwhile a handful of commodities have leapt upwards in an otherwise calm week.
The last month has put a pin in notions that the commodity super cycle is heaving back into an upswing in Q1 2013. Looking across the metals markets, for example, the story is one of falling prices raw materials, even if the last week has seen something of a levelling out after steep climbs recently.
Steel was the notable exception here: while other metals were curbing off after steep price increases, steel has once more shot up by 8.7% this week after several weeks’ decline. That said, demand for the material looks to be robust and steelmakers have been publicly bullish over the promise of increased demand in key markets.
Energy markets followed a similar pattern of levelling off after weeks of volatile shifts. Again, an exception in natural gas which rose by a little over 6% on the week, fuelling a 18.57% rise in price on the month. The simple explanation here may be the extended cold snap in several Western markets, however with brent crude oil hanging around the $110-a-barrel mark and gasoline refusing to fall away after it shot up last month, any thoughts that energy prices will truly calm down when the weather warms up may be overly optimistic.
The big story for Europeans, however, and the reason why many of the commodity graphs have an ominous drop-off in the last day or so can be traced to the island of Cyprus.
The bailout there and the fears over a domino effect across banks in Southern and Western Europe have crushed investor confidence and sent the euro tumbling. In fact, the troubled currency slid the most in 14 months against the dollar while other currencies, most notably the yen, continued to tentatively push upwards.
Volatility in the currency market echoed a sentiment discussed at a recent Procurement Leaders event in Amsterdam: European’s don’t need to look further than their own doorstep to identify major risk.
While buyers of rubber (-19.53% this month) and feeder cattle (-4.9% this month) may enjoy catching their breath after troubles in their respective markets earlier this year, there are signs elsewhere that this levelling off that’s happening in several markets, is a prelude to more volatility.