Gold, copper, corn, wheat, iron ore.
The list of commodities that have been falling and under pressure over recent weeks and months grows.
It would be easy to think there is something they all have in common. A stronger US dollar, rising US interest rates, slowing Chinese growth?
Not so, says Deutsche Bank in their weekend note db140weekender – insights in 140 words.
Rather, Stuart Kirk and his team said:
Unlike Tolstoyan families, all unhappy commodities are alike whereas each happy one is happy in its own way. This time last year, with prices still strong, the average correlation among eight diverse commodities had fallen to a decade low of 10 per cent. Since then, amid a slump afflicting everything from gold and oil to copper and sugar, the correlation has increased to 20 per cent. Yet even though the overall CRB commodities index is approaching 2009 lows, the correlation is only half the level back then. This suggests investors are mistakenly looking for common factors such as impending US rate hikes, a rising dollar or slowing Chinese growth to explain idiosyncratic moves in basic material prices. After all, no one looks for shared themes to explain Apple and Unilever’s stock prices, though they have been more in sync than commodities.
Even a broken watch is right twice a day.