The markets opened last week to the news of the arrest of Dominique Strauss-Kahn the managing director of the International Monetary Fund (IMF), (who has since then resigned), which added to the uncertainty regarding recovery in the euro zone especially the bailout of Greece, Portugal and Ireland. In addition, Germany reported a higher than estimated inflation rate for the month of April. There was mixed data coming out of the US during the week.
So, while there was a fall in the jobless claims for unemployment benefits there was news of slowdown in manufacturing growth in the mid-Atlantic region and a fall in the existing home sales in April. Another source of uncertainty for global economic recovery to the markets came from Japan with it having officially slipped into recession with its GDP shrinking for the second quarter in a row.
Central bank of Japan, however, did not change the scope of its loose monetary policy stance and retained the size of its current asset-purchase programme as well as the benchmark interest rate.
This kind of mixed news on macroeconomic front usually makes the currency markets choppy as they are not sure which way to go. This is what happened last week with the dollar going between strengthening and weakening against the Euro.
On a weekly basis, however, the dollar Euro rate did not see significant change with the dollar depreciating against the Euro by 0.64%. The uncertainty or rather the lack of definite directional cues was seen in the lack of significant movement in gold which increased by 0.9% and silver which declined by 0.45% by the close of the week as compared to their open prices.
Fears of inflation were clearly not what the markets were pre-occupied with. Neither were they too enthusiastic about global growth prospects if one were to infer the market mood from the movement in crude oil prices. WTI crude which opened at 99.36$ per barrel at the beginning of the week closed at 100.10$ per barrel at the close of the week.
Near-month Brent Crude declined on a weekly basis having closed at 112.39$ per barrel against its open price of 113$ per barrel at the beginning of the week. Near-month copper futures, however, gained by 3% over the week in what seemed like a correction and bargain hunting and not so much by enthusiasm about global recovery or growth.
Gains in the global commodity futures were seen in the agricultural commodity complex. This was mostly because of uncertainty in the planting or harvest of the various crops. For instance, near-month wheat futures increased by 10.41% over the week on reports of smaller- than -expected wheat harvest in China and the US.
Reports of less than satisfactory progress in corn planting saw near-month corn futures price rise by 3.97% over the week. Among the softs, near-month cotton futures saw a price rise of 6.07%, again on reports of slow progress in plantings of the crop in China. Sugar climbed by 4.47% over the week mostly over uncertainty regarding the final global supply of sugar. In the oilseeds complex, soyabean futures saw a weekly gain of 3.75% amidst reports of uncertainty in planting in the Midwest region of the US.
In the Indian commodity futures complex, among the agricultural commodities guar gum saw quite a bit of a weekly gain of more than 2% as reports of increased demand from the spot market gained currency in the market. Near-month turmeric futures showed a declining trend during the week, among other factors, owing to perceived sluggish demand in the spot market especially from the North. In the oilseeds complex mustard seed and soyabean gained by around 0.46% during the week.
Demand conditions in the maize spot markets were stable; maize futures increased by around 1% during the week. Wheat futures, showed a weekly decline of around 1%; the country reporting abundant wheat stocks at the moment and decision on export still pending.
The writer is senior economist, NCDEX. The views expressed are her personal