MELBOURNE: Commodities are beating stocks and bonds for the first time in nine months, and the quarterly rebound is likely to continue on China’s increasing imports of raw materials.
Oil, gold, soyabeans and sugar for delivery at the end of the year on the New York Mercantile Exchange and the Boards of Trade in Chicago and New York show at least a 3.7% appreciation, beyond the 5.7% gain in the UBS Bloomberg CMCI index of 28 commodities through March.
“When we look at the supply and demand of most commodities, there’s a lot to be very bullish about,” said Larry Kantor, co-head of research in New York at Barclays Capital Inc., which told customers last week to buy tin, gold and corn. China has “a voracious demand for raw materials.”
Imports of copper jumped 12% in February from a month earlier and were almost triple that a year ago, according to the customs general administration in Beijing. Crude oil purchases rose 8% in the month and palm oil by 20%, the administration reported. Copper rallied 8.4% in the quarter to $6,860 (Rs3,01,840) a tonne on the London Metal Exchange, crude oil advanced 7.9% to $65.87 a barrel in New York and palm oil gained 3.5% to ($597) a tonne on the Malaysia Derivatives Exchange.
First-quarter returns from commodities were more than triple the 1.6% gain in US Treasuries and the 0.2% increase in the Standard & Poor’s 500 Index. The Dow Jones Stoxx index in Europe added 2.5%, and German government bonds returned about 0.3% in the quarter.
Stocks will suffer from a slowing US economy, while European shares will be hurt by reduced profit growth, said Jane Drake, who helps oversee $10.4 billion at Tilney Investment Management in Liverpool. The Treasury benchmark 10-year note fell seven cents per $100 face value last week, continuing a monthlong slump as Federal Reserve chairman Ben Bernanke described inflation as his primary challenge.
“Over the next three months, commodities could outdo shares,” said Shane Oliver, who helps manage $83 billion at AMP Capital Investors Ltd. in Sydney. Rising prices for food, metals and fuel may accelerate inflation, driving up manufacturers’ costs and dashing speculation that central bankers from Washington to Tokyo will lower rates.
Inflation as measured by the US consumer price index rose at an annual rate of 2.4% in February, greater than economists forecast. The annual rate was 3.1% in 2006. Consumer prices rose 1.8% in the year through February in the 13 nations that share the euro, compared with a 2.4% increase a year earlier.
Fund managers say inflation and a weakening real-estate market are the biggest risks to stocks during the next year, according to a quarterly survey by the Russell Investment Group in Washington.
“The bottom line is that commodities will outperform other markets for the rest of the year due to serious problems in the equities markets,” Christoph Eibl, who helps manage $1.1 billion at Tiberius Asset Management, said in an interview on Sunday from Stuttgart.