Commodities

We are living and investing in extraordinary times. Investors face a ‘perfect storm’ of risks which are correlating and affecting markets. The largest headlines are being generated by the movements in energy markets as Brent crude oil has fallen by 45% so far this year in US dollar terms.

Euronext, the leading exchange in the Euro zone, today announced that on 16 December its commodities franchise achieved a second lifetime record daily volumes in the same month in milling wheat futures with 92,531 contracts traded.

Commodities exhibit unique characteristics including low correlations with bonds and equities and inflation-hedging abilities. These have made commodities an attractive addition to diversified portfolios and have generated growing interest in commodity indexing.

Global investors are keeping faith with equities while raising cash as markets enter the volatile year-end period, according to the BofA Merrill Lynch Fund Manager Survey for December.

According to Raphaël Gallardo, Strategist – Investment and client solutions at Natixis Asset Management, the fall in the oil price is attributable to a real phenomenon (the downward revision in global energy demand), but which he considers to be amplified by macro-financial interest-rate issues (steepening US real rates) and foreign exchange factors (dollar rally).