It is almost like central banks around the world are moving the global markets! First, it was the Swiss central bank which sprang a surprise on the markets by going against free market principles, then it was the Fed which did a twist and last week it was the turn of the European Central Bank (ECB) to throw a rope of optimism to global markets by announcing an open market operation through a covered bond purchase programme of about 40 billion euros. The purchase (through direct means) will be conducted both in the primary and secondary market beginning from November 2011 and is to be completed by October 2012. The global commodity markets seem to have accepted this announcement as a parting gift from ECB President, Trichet as most of the key near-month commodity contracts rose during the week. Not to be left behind, the Bank of England announced its biggest stimulus by leaving its benchmark interest rate at a record low of 0.5% and raised the ceiling for the so-called quantitative easing to ? 275 billion from ? 200 citing ?vulnerabilities? related to the euro area turmoil.
To further add to the optimistic mood of the markets was the better than expected US economic data which said that the U S added 1,03,000 workers in September which was higher than those added in August. The optimism showed up in a rise of around 5.14% in the near-month WTI crude contract which closed at $82.98 per barrel by the end of the week after having opened at $78.92 per barrel at the beginning of the week. The Brent crude contract closed at $ 105.88 per barrel by the end of the week after opening at $102 per barrel at the beginning of the week. The benchmark copper contract registered a gain of 4.14% over the week. Gold futures moved sideways with the near-month showing a gain of 0.65% over the week.
The Food and Agricultural Organisation (FAO) said that its monthly food price index fell by 2% in September as compared to August mostly because of production increases in key crop producing regions. In the agricultural commodities complex, corn futures for December delivery rose by 1.69 % ahead of the USDA reports expected later this week which will report on any change in planting and harvest. The last USDA report had forecast one of the lowest yields for corn in the last six years. Wheat futures declined marginally by 0.32%. Soybean futures declined by 1.53% over the week amidst reports of favourable weather conditions in the US.
In the domestic commodity markets, among the agricultural commodities, near month turmeric futures hit the upper circuit by the end of last week. Over the week the benchmark contract gained by 11%, closing at 5,222 per quintal having opened at 4,702 per quintal at the beginning of the week. In the oilseeds complex, rape mustard seed gained by 0.88% in its near-month futures contract. Near-month Castor seed futures fell by 0.13% during the week reportedly guided by weak demand in the spot market. Soyabean futures for October delivery fell by 2.9% as reports of a good soyabean crop continued to pour into the markets.
The author is senior economist, NCDEX. The views expressed are personal.