Broad commodities complex
At a broader level the outlook was a little more mixed. Tom Nelson, head of Investec’s commodities and resources team said while it does expect short-term volatility in commodity prices driven by associated moves in the US dollar and equity markets, “we don’t believe the result in the US election will be a key driver in the forecast of medium-term commodity prices”.
“Given the lack of clarity on Donald Trump’s policy framework, uncertainty and volatility will define the immediate market reaction. Gold will continue to be the main beneficiary in this environment and this volatility could also affect the Fed’s December rate hike decision. US mining and the oil and gas sector should be more resilient than others given Trump’s protectionist stance towards the US heavy industry.”
“Furthermore,” he added, “broad commodity prices could see support from a weakening dollar. However, renewable energy companies, in the US and globally, could suffer given Trump’s position on climate change and the lack of support for renewable energy,” he said.
In a flash note out following the announcement, Societe Generale said, with regards to the oil market, the short-term impact of the election on oil markets is likely to be limited to swings in sentiment and over the longer term a Trump presidency is likely to have little impact on oil fundamentals.
However, it added: “while there is little in the way of a foreign policy plan on which to judge the US’s intentions towards the rest of the world, there is an expectation of greater unpredictability.
And, it said: “More protectionism in the global economy should undermine prices of industrial commodities with an initial sell-off. The makret would then wait to see what he actually does.”
On the day, BP and Shell were down 1% and 1.5% respectively in London, while the big diversified miners were up between 1 and 3%.
Kieron Hodgson commodities and mining analyst at Panmure Gordon & Co said that one of the interesting longer term effects could be the potential impact on base metals.
“One of the themes that could come through next year and into 2018 is how the investment programme in the US impacts primary commodity demand,” he said, but added: “While there is a great deal that is uncertain, you can see potential optimism toward the real-world commodities that are actually going to be used.”
The other area Hodgson is planning to keep a watchful eye on is consumer spending.
“One thing is going to interest me is the effect on consumer confidence, how the consumer feels their own personal wealth will be affected. If there is a general feel good factor as a result of things like manufacturing being brought back onshore, that could well mean the US consumer will remain robust which would be good news for areas like diamonds and gems and the consumer good sector which would boost second derivative metals like zinc and aluminium.”
