Commodity markets come into March like a lion

The oil market is in an interesting spot at the moment. The US has had a series of strong inventory builds, though there are questions about the quality of the data.

The bulls though are pointing to China and a ramp up in demand in the second half of the year, along with potential stimulus later this month.

What changed today were the China PMIs with manufacturing at 52.6 vs 50.5 expected and services at 56.3 vs 54.4 prior. The private PMI from Caixin was also strong at 51.6 vs 50.2 expected.

The commodity market liked those numbers and copper is up 1.5% despite reports of a near-agreement at a mine in Panama that produces 1.5% of global supply. The crude oil market has been choppy though today as it struggles to balance China with variable risk appetite and high global inflation. In the past few minutes though, crude has turned higher, up 53-cents to $77.58.

I think the market will want to see more from China in the way of demand and stimulus but today’s signs are positive.

The commodity currencies are hanging in strongly against rising rates so far with AUD and CAD up 30 pips and NZD up double that in a particularly strong day. In contrast to Chin and Germany, today’s Australian CPI numbers were below estimates and substantially. That could be a demonstration of the vulnerabilities around mortgage debt in Australia.

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