Significant weekly declines in commodity markets included: Silver - 25.6%, Brent crude oil - 14.7%, WTI crude oil -13.3%, Copper -4.9%, Corn - 4.9%, and Gold -4.4%. Global equity market declines included: the U.S. - 1.7%, EuroStoxx -0.9%, Brazil -2.5%, China -1.7%, India -3.5% and Russia - 4.7%. At the same time, the U.S. Dollar, which has steadily dropping in value against most major currencies since mid-January, reversed this trend and finished the week +2.7%. Economic data likely driving some of these moves include: 1) a confusing mix of U.S. employment data where initial unemployment benefit claims unexpectedly increased to 474,000, while payrolls expanded by 244,000, but unemployment increased to 9%, 2) the Reserve Bank of India increased interest rates to manage inflation and 3) rising concerns about how the European Central Bank will address the challenges of Eurozone members - Ireland, Portugal and Greece, while also managing inflation.
MY TAKE: The bull case view in the pullback of many commodities prices suggests that a significant economic headwind is diminishing. A more pragmatic view is that as margin requirements increased in silver trading some market participants were forced to reduce positions - a process that likely increased the level of caution in other commodity markets. In my April 28 note, I suggested that a reversal in the downward trend of the U.S. dollar could be disruptive to equity and commodity markets. Many investors will be focusing on the potential impact if this past week's U.S Dollar reversal continues.